Explain how is a monopolist different from a perfectly competitive firm

A monopoly is the sole producer of a good or service while perfect competition has "many" sellers. The lack of competition enjoyed by a monopoly occurs because of barriers to entry into the market preventing new firms from entering. These barriers do not exist in perfect competition. Additionally, in perfect competition, the market is determined by the equilibrium (where demand and supply are equal). With a monopoly, however, the firm has the ability to maximize their profits by setting the price and output level. The result is higher prices and lower output, which creates dead-weight loss.

Because monopolies create dead-weight loss, they are often criticized as being inefficient. However, they can be justified in certain circumstances when the market would not exist without the monopoly power. For example, patents are often issued to firms in order to give the firms the incentive to invest in research and development. Otherwise, the firms would not have this incentive and the products would never get made.